Darkening Resource Supply Chains... Will Escaping 'Talwonjeon' Bring Light?

Energy Security Crisis Triggered by Ukraine Conflict...Direct Impact on Livelihoods Including Price Increases
Hanbit Unit 4 to Restart in October...Nuclear Plant Utilization Rate Raised to 82%
Need to Manage Entire Supply Chain of Critical Minerals...Challenges Include Overseas Resource Development

The Barakah Nuclear Power Plant in the United Arab Emirates (UAE), which began commercial operation in April last year. It is the first nuclear power plant exported by Korea. [Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee, Sejong=Reporter Junhyung Lee] The newly launched Yoon Suk-yeol administration has identified energy security as a key task because it is an issue directly linked to people’s livelihoods as much as economic growth. Due to the Russia-Ukraine war, prices of resources such as crude oil, LNG (liquefied natural gas), and coal have surged, intensifying the energy crisis worldwide. The impact is particularly severe for South Korea, where the dependence on imported energy resources exceeds 90%. The sharp rise in energy import prices inevitably leads to trade deficits and inflation. Experts advise that the Yoon administration should enhance energy self-sufficiency by implementing an energy mix policy that maximizes synergy between the efficient use of existing nuclear power plants and zero-carbon fuels such as solar power, alongside economic growth and price management.

Accelerating Utilization of Suspended and End-of-Life Nuclear Plants... New Energy Mix Strategy

According to related ministries on the 12th, the Yoon administration will begin restarting Hanbit Nuclear Power Plant Unit 4 in October. Hanbit Unit 4 has a generation capacity of 1000 MW and an annual output of 7008 GWh. The cumulative loss from its suspension over the past five years amounts to approximately 3 trillion won, meaning that restarting it could save an average annual cost of 600 billion won that was spent on replacing it with thermal power generation. The administration also aims to commence construction of Shinhanul Units 3 and 4 by the first half of 2025. It has decided to extend the operational lifespan of 10 nuclear plants whose design life expires by 2030. The Gori Unit 2, which will reach its design life limit next year, will be prioritized for restart procedures.

The government’s reason for maximizing the use of existing nuclear plants is to rapidly increase nuclear utilization rates and maximize energy efficiency. Korea Hydro & Nuclear Power’s plan to raise the nuclear utilization rate from 74.5% last year to 82% this year is for the same purpose. According to the Monthly Electricity Statistics Report, as of February this year, the purchase price of nuclear power was 67.99 won, which is more than three times cheaper than LNG combined cycle at 248.05 won and oil at 271.65 won. Compared to the surge in coal and oil prices amid the prolonged Russia-Ukraine conflict since last year, increasing nuclear utilization offers the advantage of securing cheap and stable energy supply.

The new government plans to revise the Basic Energy Plan early to promote the expansion of nuclear power share, emphasizing ‘phasing out nuclear power’ and ‘expanding renewables.’ The original plan to release the 4th Basic Energy Plan in 2024 will be advanced by two years to be completed by the end of this year. Based on the Basic Energy Plan, the 10th Basic Electricity Supply and Demand Plan will also be completely overhauled. The main focus is expected to be the harmony between nuclear power and renewable energy. In consideration of this, the government also plans to fully revise the national greenhouse gas reduction target (NDC) achievement plan for the industrial and transportation sectors. The electricity market and electricity rates are also expected to strengthen their independence and expertise. The government aims to concretize an energy security strategy by building a future-oriented power grid capable of stable electricity supply based on competition and market principles.

Professor Dongwook Jung of the Department of Energy Systems Engineering at Chung-Ang University said, “When establishing this year’s electricity supply and demand plan, the energy mix must be set with a view toward 2050, not 2030. It is crucial to harmonize renewables and nuclear power to minimize the burden on the public, and how much gas and coal can be reduced will also be a key factor.”

Legal Framework Needed for Overseas Mineral Resource Investment

Energy security is not limited to nuclear power. To realize the ‘rational energy mix’ proposed by the Yoon administration, policies linked to the entire supply chain, including strategic minerals, are inevitable. Accordingly, the new government has announced through its national agenda that it will expand the scope of resource security to hydrogen and critical minerals and increase stockpiles.

The new government has also signaled the revival of the ‘resource diplomacy’ of the Lee Myung-bak administration. This is based on the judgment that South Korea had been inactive in overseas resource development amid the trend of resource weaponization by major countries. The surge in raw material prices and disruption of global supply chains due to geopolitical conflicts such as the Ukraine crisis also influenced this decision. The national agenda includes plans to reactivate overseas resource development centered on the private sector, which had been dormant since the Moon Jae-in administration.

However, direct overseas resource development by the government remains a challenge. Under current law, the Korea Mining and Resources Corporation (KOMIR), the entity responsible for resource development, cannot make direct investments in overseas resources. Moreover, KOMIR must sell overseas mines secured by the previous administration to improve its financial structure. Although the importance of supply chains is increasing, KOMIR is required to dispose of overseas mines producing key minerals such as nickel, copper, and cobalt.

Given this situation, there are calls to amend the Korea Mining and Resources Corporation Act, which stipulates the sale of overseas assets. To stabilize the energy supply chain as per the new government’s national agenda, major overseas mines owned by KOMIR, such as Ambatovy in Madagascar and Cobre Panama in Panama, are considered essential. The Ministry of Trade, Industry and Energy, the competent authority, is reportedly reviewing measures to change the status of these major mines from ‘sale’ to ‘retention.’

This content was produced with the assistance of AI translation services.